Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Statistics and Probability Expert

describe what would be the utility values for the amounts given based on the indifference probabilities?

Chez Paul is contemplating moreover opening another restaurant or expanding its existing location.  The payoff table for these two decisions is

 

s1

s2

s3

New Restaurant

-$80K

$20K

$160K

Expand

-$40K

$20K

$100K

Paul has computed the indifference probability for the lottery having a payoff of $160K with probability p and -$80K with probability (1-p) as follows-

 Amount 

Indifference Probability (p)

 -$40K

0.4

  $20K

0.7

$100K  

0.9

a. Is Paul a risk avoider and a risk taker or risk neutral? describe.

b. Presume Paul has defined the utility of -$80K to be 0 and the utility of $160K to be 80.  describe what would be the utility values for  -$40K, $20K, and $100K based on the indifference probabilities?

c. Supposing P(s1) = .4, P(s2) = .3, and P(s3) = .3.  Which decision must Paul make using the expected utility approach? 

d. Relate the result in part c with the decision using the expected value approach.

Statistics and Probability, Statistics

  • Category:- Statistics and Probability
  • Reference No.:- M922123

Have any Question? 


Related Questions in Statistics and Probability

Dan is at the bottom of donnas preference list and donna is

Dan is at the bottom of Donna's preference list, and Donna is at the bottom of Dan's preference list. Is it possible that there is a stable matching that matches Dan to Donna? Justify your answer.

A random sample of 1260 adults living innbspnew york

A random sample of 1,260 adults living in New York city was asked (among other things) to name their favorite sports (to watch). Of the 670 females in the survey, 375 indicated that baseball was their favorite sport. Of ...

Project -you must show all steps for the hypothesis testing

Project - You must show all steps for the hypothesis testing; use either the critical value approach or the p-value approach. 1) a) Choose one of the following quantitative variables from the data set: Age, Weight, Cell ...

1 what aspects of data analysis can be performed by

1. What aspects of data analysis can be performed by computers, and what are the advantages of using them to do so? 2. Review the procedures used to verify that collected data are coded and entered correctly before they ...

1 what can researchers do to minimize error variance2

1. What can researchers do to minimize error variance? 2. Discuss the trade-off between internal and external validity. Which is more important? Explain.

Twenty years ago 40 children were born in the same hospital

Twenty years ago 40 children were born in the same hospital in Denmark. Researchers classified the children by whether or not they were breast-fed for at least 3 months. They were interested in whether breast-feeding ten ...

Assume that you want to test the claim that the paired

Assume that you want to test the claim that the paired sample data come from a population for which the mean difference is μd = 0. Compute the value of the t test statistic. Round intermediate calculations to four decima ...

1 the waiting time t between successive occurrences of an

1. The waiting time T between successive occurrences of an event E in a discrete time renewal process has the probability distribution P(T =1) = 0.7, P(T = 2) = 0.3. (iii) If an observer arrives after the renewal process ...

Christine has always been weak in mathematics based on her

Christine has always been weak in mathematics. Based on her performance prior to the final exam in Calculus, there is a 45% chance that she will fail the course if she does not have a tutor. With a tutor, her probability ...

Researchers are interested in determining if men and womens

Researchers are interested in determining if men and women's hearts tend to be different sizes. In a sample of 12 males, the mean diameter of the heart was 13.21 cm with a standard deviation of 1.05. Among 9 females, the ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen